IN THE LAST DRAWING: The framework for cross-border bankruptcy is almost ready, says the head of IBBI Mittal

The model of a law on cross-border insolvency is almost ready and is being considered by the government, said Ravi Mittal, chairman of the Bankruptcy and Insolvency Council of India (IBBI).

More attractive

The adoption of a cross-border insolvency law will make India an even more attractive destination for cross-border investment, as India’s insolvency regime will be predictable for foreign companies, Mittal said at an international webinar on “Cross-border insolvency and global lessons for India”. from the Indian Institute of Insolvency Specialists ICAI (IIIPI), in conjunction with the International Insolvency Institute, USA.

He also stressed that as part of its “Make in India” program, the government wants to attract foreign companies to set up production facilities in India.

Mittal said the Indian government wants to introduce a globally accepted and well-regulated law on cross-border insolvency.

Based on UNCITRAL law

The new comprehensive framework is likely to be largely based on UNCITRAL’s model law on cross-border insolvency, which has been adopted by the United States, the United Kingdom, Japan and Singapore. It is now proposed that the UN Model Law be adjusted to meet the Indian context and requirements.

“There is a clear need for a cross-border insolvency framework in India. Our country is considering adapting a model law (UNCITRAL model law) with certain Indian-specific modifications. We understand that the model law will have great benefits for our country, “Mittal said.

Mittal noted that the UNCITRAL model is emerging as the most widely accepted legal framework for dealing with insolvency issues, and more than 40 countries have adopted this model law.

He stressed that global experience shows that cross-border investment decisions are influenced by insolvency laws in a particular country.

The proposed Indian law will allow the country to refuse recognition of foreign proceedings or regulations if something is contrary to domestic public order. Therefore, priority will be given to domestic production and thus there will be protection for local creditors, he said.

“Will lead the coordination”

It will also enable Indian unions to have access to foreign jurisdictions and to enjoy recognition and cooperation. This will allow foreign representatives to have the same advantages in India. The model law will guide coordination between courts and insolvency specialists in foreign jurisdictions, Mittal said.

Mittal noted that the existing IBC covers the situation of cross-border issues through sections 234 and 235 of the Code. “Our judiciary has facilitated cross-border insolvency in several cases, and Jet Airways is one of those cases that illustrates the need for a regime that deals with situations where the corporate debtor may have creditors and assets scattered across jurisdictions. “We also saw cross-border issues in the case of Videocon Industries,” he said.

Debashis Mitra, president of ICAI, said cross-border insolvency has a great future and stressed that more than 60 per cent of insolvency professionals in India are certified public accountants. He said that IIIPI is an active participant in the process of drafting regulations related to cross-border insolvency.

Ashok Haldia, chairman of IIIPI, said the intensity of trade-industry cooperation in India and the United States extends even to small and medium-sized enterprises. In such a case, there is a desperate need to resolve cross-border insolvency effectively and fairly. IBC provides a framework for cross-border insolvency. However, this is hardly resorted to, “said Haldia.

The Ministry of Corporate Affairs has already received public comments on the proposed legal framework for cross-border insolvency under the IBC.

The adoption of a cross-border insolvency regime is expected to contribute to India’s image as the best insolvency jurisdiction.

Posted on

June 18, 2022

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